UAE finance chief eyes 4.5% growth in 2010

UPDATE 1: Central bank's deputy governor also says house prices have hit bottom.
UAE finance chief eyes 4.5% growth in 2010
By Tony Munroe
Thu 29 Oct 2009 10:12 AM

Growth in the UAE economy could exceed 4.5 percent in 2010, the central bank deputy chairman said on Thursday, adding that he was not particularly worried about inflation following a shake-out in the property sector.

He also said banks in the UAE were healthy and did not need a further injection of liquidity.

Omar bin Sulaiman, who is governor of the Dubai International Financial Centre (DIFC) and deputy chairman of the UAE central bank, said UAE's real estate sector had bottomed out and growth was picking up.

"You don't want high inflation in this area, you want stable growth, and you want credible growth," he said on the sidelines of a DIFC event in Mumbai.

"At the same time, it was a good filtration process," he said of the plunge in the property sector that followed a boom.

"Today you have a lot of credible opportunities in the real estate sector," he said.

As for the overall economy, which was squeezed by the drop in oil prices from last year's record highs, bin Sulaiman cited forecasts for growth next year of 3.5 percent and 4.5 percent.

"I wouldn't be surprised if we've seen higher numbers from UAE in 2010," he said, referring to the forecasts and citing the federation's infrastructure as an engine that would accelerate recovery.

The UAE is the world's third-largest oil exporter, and is benefitting from the rise in oil prices off a trough hit early this year.

Bin Sulaiman also said inflation is not a worry.

"One of the major concerns was the rents in the past few years," he said. "That dropped this year, which makes the whole environment more competitive again."

The oil exporter's economy minister said last week he expected the UAE, the Arab world's second-largest economy, to grow by 1.3 percent in the current year. In September, the central bank governor had said the economy could contract or register a low growth rate.

Bin Sulaiman said banks in the seven-member federation are healthy and well-capitalised for now and did not need a further injection of liquidity.

A UAE newspaper said this month that the finance ministry had delayed the final $5.45 billion tranche of a planned liquidity injection into banks because they no longer need it.

However, a Standard Chartered executive said earlier this month that UAE banks faced a liquidity shortfall of up to $11 billion and were suffering from bad debt incurred through unsecured lending.

"I don't see a need for it right now," Bin Sulaiman said when asked if the remainder of funds earmarked for the bank rescue package would be injected.

"We are very happy with the strength of the UAE banking system, and we don't see any sign of weakness," he said. (Reuters)

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